Interesting decision for Apple to make here on this application. VLC is fantastic on the Mac and it looks equally good (except for high bitrate MKV files) for the iPad. If they accept it, people will be less likely to make videos in H.264. On the other hand, Apple’s customers would have a field day playing all of those ripped DVDs of yore.
The killer for this application, which hasn’t yet been shown, is if it can stream videos effectively from a NAS server share or over the net. Uploading videos via iTunes is olde fashioned.
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